Markets Go Dark Ahead of Storm

Stock and options exchanges and their regulators closed U.S. markets on Monday, in the first marketwide shutdown since September 2001, as Wall Street braced for Hurricane Sandy's approach.

At the New York Stock Exchange, all is quiet as the impending storm closed exchanges, MarketWatch's Larry Kofsky reports from the floor of the New York Stock Exchange. Photo: Reuters.

Cuttone & Co.'s Keith Bliss joins Markets Hub to discuss how New York trading firms prepared for Hurricane Sandy, and what was the mood among traders as the storm hit the East Coast. Photo: AP.

Dow Jones Newswires Reporter Chris Dieterich joins the News Hub to discuss the closing of the New York Stock Exchange, Nasdaq and Options markets, the first unscheduled close of the exchanges since September 2001. Photo: AP.

The agreement, reached Sunday night, marked a reversal from an earlier call by the exchanges to remain open for business to electronic trading even as they shuttered their trading floors in advance of the storm. By late Sunday, exchange officials, traders and regulators were expecting that markets may stay closed on Tuesday, too.

Trading in stock futures, however, continued, though it closed at 9:15 a.m. Eastern time as usual. Dow Jones Industrial Average futures ended down 61 points, or 0.5%, to 12993. Standard & Poor's 500-stock index futures shed 4.85 points, or 0.5%, to 1402.75 and Nasdaq 100 futures shed 15.50 points, or 0.6%, to 2643.50.

Hurricane Sandy headed north off the U.S. East Coast on Saturday after leaving 58 people dead across the Caribbean, following a path that could see it blend with a winter storm and hit the U.S. East Coast with a large storm early in the week. Follow real-time coverage in the 2012 Storm Season stream..

"In all my life I can't remember anything that is supposed to be as severe as this," said Stephen Ehrlich, chief executive of Lightspeed Financial Inc., an electronic brokerage and software firm based in New York. Mr. Ehrlich said in an email that Lightspeed's employees have been set up at home so that those who have power can assist the firm's clients, and its Chicago office will serve as Lightspeed's main call center.

The initial plan to keep electronic trading open had drawn complaints from customers, who argued to the exchanges and the Securities and Exchange Commission that a partial close would be too complicated, according to people with knowledge of the matter.

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One concern: Closing of the New York Stock Exchange floor would require trading firms to recode their systems Sunday night to route away from a major market center, in preparation for the market open, even as employees were unsure about transportation to their offices.

"The U.S. equity markets will not be open Monday because of the impending storm," SEC spokesman John Nester said in an email. "The decision was made by the markets and market participants after careful consideration in consultation with the SEC."

As of Sunday night, "it is likely that the markets will be closed on Tuesday" as well, according to a notice sent to traders by Nasdaq OMX late Sunday.

"We support the consensus of the markets and the regulatory community that the dangerous conditions developing as a result of Hurricane Sandy will make it extremely difficult to ensure the safety of our people and communities, and safety must be our first priority," NYSE said in a statement. "We will work with the industry to determine the next steps in restoring trading as soon as the situation permits."

The ruling to shut the U.S. stock market virtually ensured that markets in derivative contracts tied to stocks and major indexes would need to close as well, exchange and clearinghouse officials said Sunday. Traders typically formulate prices for options contracts by looking at the going market rate for the stock or securities from which the contracts derive their value.

Officials with the largest U.S. options exchange operators and OCC, the industry's clearinghouse, confirmed that stock options would not trade Monday.

Wall Street executives and other trading-firm chiefs told exchange officials and regulators Sunday that opening without some key market centers in operation wouldn't give major market participants enough time to reconfigure trade-routing programs and otherwise prepare for the stock-market open Monday, according to people involved in the discussions.

While some were worried the confusion could allow traders to take advantage of potential delays in routing orders among exchanges -- with the NYSE floor closed, for example, it could take longer for computer systems to route trades to fully electronic markets. But the overriding concern was that Hurricane Sandy, and the difficult Monday morning commutes the storm will cause, wouldn't allow engineers and technologists time to test systems adequately before the market opened, according to people involved in discussions about the decision to close the stock markets.

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